Iowa, like 45 states throughout the U.S., faced a budget deficit for fiscal year 2009 and fiscal year 2010. For fiscal year 2009, Iowa faced a $134 million deficit that the Center on Budget and Policy Priorities projected would rise to $779 million for fiscal year 2010.[1]Gov. Chet Culver announced in January 2009 that in light of the state's budget deficit more than 80 percent of state programs would be subject to a 6.5 percent budget cut. The governor had already cut $40 million and made a 1.5 percent across-the-board cut totaling approximately $90 million for fiscal year 2009. "While we’re cutting day-to-day expenditures of state government, we will invest in creating jobs, supporting businesses, and strengthening our economy. And we’re in a position to do it without raising taxes,” said Culver. Approximately $6.2 billion was budgeted for fiscal year 2010.[2] However, some Iowa lawmakers said that an additional $133 million in cuts could and should have been made. Legislators suggested increasing Culver's recommended 6.5 percent in budget cuts to 8.5 percent. "These are difficult times for family budgets and the state budget is no different," said Rep. Jo Oldson.[3]

Impact of budget woes

In January 2009, Iowa Workforce Development announced that unemployment had risen to 4.6 percent, compared to 4.3 percent a month prior and 3.8 percent a year prior. Over the preceding 12 months, 9,300 professional and business services jobs, 7,000 manufacturing jobs, and 3,800 construction jobs were lost. In total, 77,000 Iowans were unemployed.[2]

Shelby County's mental health budget was expected to be operating in the red by the end of fiscal year 2009, with a fund balance deficit of 1 percent due to the 1.5 percent cut implemented at the state level. The governor's proposed 6.5 percent cut in the next year was expected to further increase the deficit for the county program to a minus 11 percent fund balance. By 2012 the deficit was estimated to be at negative 43 percent.[4]

In light of the state's deficit, Sen. Matt McCoy said that he would introduce a bill to force about two-thirds of Iowa's school districts to merge. He wanted to target districts with fewer than 750 students and free up tens of millions of dollars in administrative costs that could be spent on teachers and students. However, school officials worried that the bill would create unequal workloads among superintendents in urban and rural counties and shift the focus away from the students.[5]

Among the options the Iowa Supreme Court considered regarding budget cuts for fiscal year 2010 were reducing non-personnel costs, travel reduction, temporary and permanent layoffs and the switch to electronic equipment to record court proceedings. Some judges also offered to participate voluntarily in furloughs.[6]

Budget cuts to the judicial branch also stood to affect the rate at which cases were processed. Officials said that the cuts meant that prisoners would sit in jail longer in criminal matters, leading to increased jail costs. Also, it was estimated that there would be a decrease in fine collections, which could in turn decrease county and city revenue.[6]

Budget background

In Iowa, state agencies prepare and submit requests by October 1 for the following fiscal year. On December 15 the Revenue Estimating Conference, comprised of the governor, the director of legislative services agency, and a third member agreed to by the other two, meet to estimate the revenue for the upcoming fiscal year. The governor then reviews the budget requests by state agencies, conducts public hearings and submits recommendations to the legislature in January. From January through February the legislature hosts a variety of joint meetings. Once the budget bill is approved the bill is submitted to the governor, who has line-item veto authority in appropriations bills.[7]

Iowa's fiscal year begins July 1 and ends June 30.

Budget figures

The following table provides a history of Iowa's expenditures and gross domestic product (GDP).

NOTE: The figures for FY 2009 had not been finalized at the time this data was compiled.

Ideas about why the crisis occurred

General fund revenues, lottery and other transfers, accruals, refunds and gambling estimates for the fiscal year that began in July were $132 million lower than projections made in October.[9] For fiscal year 2009, the revised estimate of net general fund receipts totaled $6,052.0 million, which was $99.5 million less than the October 2008 Iowa Revenue Estimating Conference estimates.[10]

Approximately $525 million was owed to the state in unpaid fees, fines and taxes, according to the Iowa Department of Revenues. This excludes the amount owed to individual cities. Des Moines, for example, had more than $1 million in unpaid parking fees.[11][12]

Proposed actions

Governor Chet Culver

In late January, the governor submitted a $6.2 billion budget for fiscal year 2010, which included budget cuts across most state departments and no recommendations for tax increases. Culver said that he would like to cut approximately 6.5 percent to almost every state department. However, Culver said that some departments - education, department of corrections, appropriations to meet requirements of the department of justice, Homeland Security, human services, public safety, victims compensation and workforce development - would be exempt from cuts.[2]

Culver said that he was upset with high salaries at the Rebuild Iowa Office, an agency that Culver created to coordinate flood recovery efforts in 2008. He added that the salaries would be "adjusted downward" in the budget.[13]

In February 2009 Culver signed into law a bill that allowed for school budgets to expand by 2 percent during the 2010-2011 school year. Additionally, the bill increased state funding for elementary and secondary schools by $60 million.[14].

Additionally, Culver said that he planned to continue supporting a failed bill known as "prevailing wage," House File 333, that would set minimum pay and benefit standards for workers on public projects."I think it's time we move forward on some important bills that will help hardworking Iowans, and we're going to keep fighting to do that," Culver said.[15]

Republicans

Republicans said that they weren't pleased with the governor's budget cut recommendations. Senate Minority Leader Paul McKinley said, "When you’ve increased spending 21 percent, to cut 7.5 percent is a gesture, but we’re in this mess simply because they’ve spent too much money."[16] House Minority Leader Kraig Paulsen said that they would propose their own ideas for saving money, such as "getting rid of" the Iowa Communications Network by either selling it or shutting it down.[9]

In late January, Senate Republicans issued their own plan to create a balanced budget, some highlights of which included enacting a Constitutional amendment that would prohibit the legislature from spending more than 99 percent of the revenue taken in by the state and mandating that the legislature must use the December Revenue Estimating Conference (REC) for the upcoming budget and budget more responsibly and with greater transparency and accountability. “Just from looking at the current state of Iowa’s budget and the massive overspending that had occurred during the last two years, it is clear that Iowans cannot afford to have the Democrats continue the kinds of budgetary practices that have ballooned Iowa’s budget and put us in these tough times,” said Senate Republican Whip Steve Kettering.[17]

Democrats

Iowa House Majority Leader Rep. Kevin McCarthy said in late February that he was considering the sale of Iowa's fiber-optic communications network to raise money and ease the state budget. Prior to McCarthy's suggestion, the House rejected a similar proposal by Republicans throughout the state. "I know it's been discussed in the past, but we haven't had this kind of economic challenge before," said McCarthy.[18] However, legislative Democrats said that regardless of the final outcome there was a 2.47 percent gap between the governor's budget and theirs. In late February lawmakers called for $134 million in budget cuts beyond the governor's proposed cuts.[9]

Rep. Paul Bell filed a bill that targeted owners of mobile or manufactured homes who were delinquent on property taxes by preventing them from renewing their vehicle registrations. Bell said that the state needed to do something about the approximately $525 million that was owed the state in unpaid fees, fines and taxes.[12]

Economic stimulus package

Iowa was expected to receive approximately $2 billion from the $787 billion economic stimulus package. According to White House officials, the stimulus bill was estimated to create or save 37,000 jobs.[19]

Budget transparency

As of 2009, Iowa had no statewide, official spending database online.

Economic stimulus transparency

The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the nation. Of that $787 billion stimulus package, it was estimated that 69%, or over $541 billion, would be administered by state governments.[21]

It was estimated that Iowa would receive at least $1.5 billion in federal funding.[22]

Legislation

Iowa House File 801, which would have created a transparency database, died despite passing the House by 96-3.[23] It was expected to be raised again in 2010 during the second session of Iowa's General Assembly.

Government tools

The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database: